Sterling held well at
multi-month highs against the euro and dollar as traders weighed up whether
lawmakers would back a key parliamentary amendment that would effectively take
a no-deal Brexit off the table.

The UK parliament will
debate and vote later in the day on Prime Minister Theresa May’s response to
the overwhelming rejection of her Brexit plan earlier this month.

The main focus is on
amendments which have been put forward by other lawmakers, especially one that
provides for postponing the March 29 Brexit deadline should a divorce deal with
the European Union not be approved by parliament by Feb 26.

That amendment is seen
as the most likely to pass if the opposition Labour Party does back it as many
have indicated.

If the amendment
passes, “the pound could strengthen further lifting cable towards the
$1.3300-level,” analysts at MUFG told clients, adding that failure to pass it
could lead to the currency slumping all the way back to $1.3050.

Senior Conservative
lawmaker Graham Brady has put forward another amendment, calling for the Irish
backstop arrangement envisioned by May’s Brexit divorce deal to be removed and
replaced with “alternative arrangements”. This is not expected to pass.